Best Volume Indicators in Forex Trading
In trading, volume is a
very essential tool in the sense that it’s hard to make any sober trading
decisions without volume analysis. 3 things to note; trading decisions will
always be based on price, volume and open interest. Ideally, volume is
responsible for price movements and trend formation. Therefore, without volume,
you won’t know the price direction and you stand losing out your investment.
That’s just how important volume in trading is. Let’s look at how volume is
measured and how you can apply volume analysis in your trading.
How
to measure Volume
Volume can only be
measured through counting tick movements. With volume indicator, you are able
to see how many ticks the price moved up or down within a specified timeframe.
In a busy market trend, obviously the number of ticks will go up by every
second. A clear indication of increase in trading volume.
Best Volume Indicators
·
Volume Oscillator indicator – the
indicator moves above and below the middle line. Above the center line gives a
positive value and below the center line, a negative value. A positive value
indicates a prevailing trend that is strong; whether bullish or bearish. A
negative value shows a weak prevailing market trend.
·
Volume Zone Oscillator (VZO) – is fairly
new in the world of trading. It’s based on the notion that volume will always
come before the rise or fall in price.
Why
use volume indicators in Forex?
The answer is simple, volume
analysis is a powerful tool for understanding price movements and forex trends.
Volume highlights instances of abnormally high sales or purchases in the
market. What happens during such instances, you can take the opportunity to
place your bets alongside major traders. Additionally, volume analysis
highlights trend strength or weakness before it even hits the price chart hence
guiding your trading decisions.
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